If you’re getting ready to bring home a new baby, you’ve probably got a lot on your plate—especially when it comes to your finances. A top concern for many new parents is figuring out how to pay for parental leave. Only 23% of folks working in the private sector have access to paid maternity leave, according to research from career site Zippia. In fact, the United States is only one of seven countries worldwide that doesn’t provide guaranteed paid parental leave of some kind.
Families ought to have time after the baby is born for the mother to heal from childbirth, and for both parents to bond with their new baby. Six weeks is the typical recovery period after giving birth; eight weeks if you’ve had a cesarean section, according to the American Pregnancy Association. But Zippia found that one-third of new mothers take little to no time off after giving birth or adopting a new child.
Read on for some practical ways to financially prepare for parental leave.
Understand your options.
What are your employee benefits?
Before you start making financial plans, check in with your employer to see what your options are. Do you qualify for any paid time off? The Zippia research found that the average amount of paid maternity leave provided by companies is eight weeks. However, every company is different, and there is no requirement under federal law that companies offer any amount of paid leave.
You might also be able to make up lost income using short-term disability insurance. Typically offered by employers, this type of coverage can replace a portion of your pay if you’re unable to work due to a short-term illness. Insurance policies may cover normal pregnancy and childbirth. Long-term disability insurance, which provides benefit payments for a longer time, could come in handy as well—especially for those who have a complicated pregnancy or delivery.
Will you leverage FMLA?
Beyond what your employer offers, the Family and Medical Leave Act (FMLA) allows eligible employees to take up to 12 weeks off for the birth and care of a newborn child. While this leave is unpaid, it does protect the employee’s job and requires that their health benefits remain the same during their leave. FMLA isn’t automatically available to all workers, though. Both the employer and employee must meet certain requirements, including that the employee must have worked for their employer for at least 12 months.
Does your state offer paid parental leave?
According to the National Conference of State Legislatures, the following 11 states (and the District of Columbia) offer paid family and medical leave. These state programs are funded with employee-paid payroll taxes. Some are also funded in part using employer-paid payroll taxes.
- New Jersey
- New York
- Rhode Island
If paid leave is available in your state, do some research to see what’s available. California, for example, offers benefit payments equal to between 60% and 70% of the employee’s weekly wages that were earned five to eighteen months prior to their claim start date. Payments can last up to eight weeks. It’s worth noting, however, that these benefits do not protect the employee’s job. In some cases, workers may leverage state paid parental leave in combination with FMLA or other state laws to protect their employment.
Start planning for your parental leave.
Once you understand your benefits, you can estimate how much unpaid time off you may need to take. The goal is for you and any other wage earners in your immediate household to set aside enough money to replace some or all of your lost income. Consider the following tips:
- Save up your paid sick days and vacation days to use for parental leave. You can also see if your company will allow other employees to donate their days to you.
- Begin transferring some portion of every paycheck into your savings account to build your parental leave fund.
- Direct all work bonuses, overtime pay, raises, and tax refunds into your savings account.
- Pick up a temporary side gig and devote the earnings fully to your parental leave fund.
- Request cash gifts in lieu of traditional pregnancy presents.
- Reduce your expenses to free up more money for your parental leave. Begin by tracking your budget and eliminating unnecessary bills and excessive spending.
- If you’re worried that you won’t be able to cover your essential expenses during your leave, you might consider a personal loan (although beware, many personal loans may be accompanied by high interest rates). If approved, you’ll receive funding in a lump sum that you can use to cover some or all of your parental leave.
Everyone’s financial situation is different, which means that no two parental leaves will look the same. Your employer benefits will likely play a big role in how you plan your leave, but there may be other resources out there for you as well.
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